Asia Insurance faces a challenging landscape as underwriting profits are projected to decline over the next two years, according to a report from S&P Global Ratings. Despite this anticipated contraction, the insurer is expected to maintain a stable outlook, bolstered by a robust capital and earnings profile.
S&P highlights that Asia Insurance has enhanced its capital buffer, primarily due to recognizing diversification benefits and an increase in net assets following the adoption of the International Financial Reporting Standards (IFRS) 17. However, these positive trends are tempered by elevated capital requirements linked to natural catastrophe risks.
The stable outlook for Asia Insurance hinges on its sustained capital strength and solid competitive positioning, which are essential for maintaining profitable underwriting. Over the next 12 to 24 months, the insurer’s sensitivity to market and credit risks will be under close scrutiny.
The company has shown strong underwriting performance in Hong Kong, a factor that supports its overall credit profile, according to S&P. As a mid-tier entity in the fragmented property and casualty (P&C) insurance sector, Asia Insurance effectively utilizes its local market knowledge and brand strength to manage risk selection.
Despite these advantages, underwriting profits are forecasted to narrow in the coming years, largely due to increased exposure to global risks associated with the insurer’s expanding inward reinsurance portfolio. This inward business now represents more than half of Asia Insurance’s underwriting activities and has experienced significant premium growth in 2023 and the first half of 2024. While this portfolio is well-protected by reinsurance coverage, the added exposure brings potential earnings volatility.
Asia Insurance’s capital and earnings remain robust, supported by expected premium growth and a moderate capital base of approximately $560 million. Nevertheless, heightened investment risks arising from its holdings in high-risk assets, such as equities, may pose challenges, particularly as its international operations expand.
As the primary operating subsidiary and key financial contributor to Asia Financial Holdings, Asia Insurance accounts for 57% of the group’s assets and 70% of its net profit in 2023. Asia Financial Holdings, a Hong Kong-listed investment company, operates with minimal debt leverage and has diversified investments across sectors including life insurance, healthcare, and retirement services. Despite the parent company’s varied business interests, its credit standing is deemed neutral concerning the credit profile and ratings of Asia Insurance.
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